The 23-year-old was one of the club's outstanding performers last term, scoring five SPL goals in 31 appearances.
Boss Peter Houston was delighted with Swanson's second half to the campaign and feels there is plenty more room for improvement.
"I'm absolutely delighted that Danny has agreed to extend his contract at Dundee United," he told the club's official website.
"He made a big impression in the second part of last season when he was given a run of games and added consistency to his undoubted ability.
"He played a major part in our achievements last season and I'm sure he can improve even further in the coming seasons.
"It's great to see yet another player who wants to remain at the club longer term and I'll be continuing the process of speaking to others about contract extensions during pre season."